Diverting savings from investments into house down payment

[Lifestyle Deflation]

Edit: I realized my title was a bit confusing, I'm NOT talking about selling any investments for this, just directing my future savings.

So I'm saving up for a down payment for my first house. I am EXTREMELY ready to move on from renting and I want to be able to buy a house as soon as I can.

However, obviously there's an opportunity cost to stashing my savings in a sub-1% savings account instead of investing it.

My plan is to continue maxing out my tax-advantaged accounts (401k and Roth) and put all of the money I'd normally put in my taxable investments into the savings account.

What have you done for this situation? Is there anything obvious I'm missing here? After being obsessed with investments over the past year or so it'll feel a little painful to just let my taxable accounts sit idle until I get enough for the down payment.

[ToeInTheWater]

depending on how soon you expect to buy, protecting principle is likely more important than the potential for gains.

i'd forgo investing with this $ for the time being, and stay with something safe, albeit at a very low int rate

fwiw

b

[slugline]

When I was saving up for my down payment, my time frame was two to four years. I was investing it in Vanguard's Short Term Investment Grade Bond Fund (VFSTX). If my house purchase horizon had been less than two years, then I would have probably stuck with a savings account. I'm a fan of the philosophy of matching volatility/risk of an investment vehicle with how soon you'll be counting on the money to be there.

[MrFancypants]

However, obviously there's an opportunity cost to stashing my savings in a sub-1% savings account instead of investing it.

Whatever opportunity cost there may be from not having the money in a place that offers a higher rate of return is probably not as great as the cost of PMI over the necessary length of time.

Also, in my experience the cost per square foot to pay a mortgage tends to be drastically less, so another way to look at it is that there's an opportunity cost that's paid every month you rent versus own.

My approach to this has been to park the money in a highly stable account.  It would suck for the money to be in an S&P 500 index fund and have the bottom fall out right before you closed on your house.

[Bob W]

Not sure how much you are saving for a down payment?   It seems 20% is the magic number on this site in order to avoid PMI.

IMHO -- buy a first house that is humble and very affordable.   

I wouldn't shy away from plowing your down payment money into s and p type of investments.

1.  If the market goes down you can wait it out or just add more to it.
2.  If you decide that you aren't going to buy for whatever reason you can keep it there
3.  After a year of so you may look at your down payment money and realize that the growth and income it is generating pays half your apartment rental. 

I just spoke with one of my young nephews yesterday.  They had bought 6 acres a year ago to build a house.  They bought their current house about 3 years ago and it has been on the market for a year.   I wished them good luck,  but I know that one of the biggest risks of house buying is the selling side.  Have seen plenty of people take a beating on the sale of their house that they thought they were saving money on over renting.